RENDER - The International Magazine for Rendering

Determined Industry Deciphers Future at NRA's Annual Convention

By Tina Caparella

Although renderers throughout the United States (US) have been enjoying record prices for their products over the past few years, it hasn’t come without challenges, such as Indonesia closing its borders to meat and bone meal after the discovery in April of a fourth case of bovine spongiform encephalopathy in California and the increasing battle against grease theft. In spite of these setbacks and impending new regulations under the Food Safety and Modernization Act (FSMA), renderers appeared determined as the industry gathered in late October on the shores of Laguna Niguel, CA, for the National Renderers Association’s (NRA’S) 79th Annual Convention.

Bringing a light-hearted tone to the country’s economic and political woes was keynote speaker Dr. Gene Stanaland, Auburn University, who is amazed at the misunderstanding of US economics and the perception Americans have of the presidency.

“It is impossible for a president to repeal a law,” he declared. Laws are passed by Congress, which he said is like a lawsuit. “You go in a pig, you come out sausage. Politics comes first, everything else comes second.” Stanaland explained that when Congress threatens to cut the deficit, they don’t cut it from where it is, but from where it would be, and the US government is borrowing 40 cents for every dollar it brings in. He also clarified that under the Troubled Asset Relief Program, or TARP, monies loaned to Wall Street have since been repaid.

The US economy has been at a two percent growth rate and an eight percent unemployment rate for a while, creating uncertainty among Americans and businesses. Consumers have reduced their debt and businesses have lots of cash sitting around, indicating a lot of buying power ahead. Stanaland’s forecast is the economy will muddle through 2013 but should start picking back up in 2014.

Steve Kopperud, Policy Directions, continued the dialog on politics, declaring that Congress is almost more important to the rendering industry than who sits in the White House.

Addressing FSMA was Leigh Wilkinson, American Feed Industry Association (AFIA), who noted the new food safety regulation could have a $1.2 billion impact and will affect all ingredient processors, feed manufacturers, pet food producers, feed and ingredient importers, and transportation within these sectors. The new regulation will include good manufacturing practices for animal feed manufacturers based on human food good manufacturing practices. One concern at AFIA is a possible exemption for small food facilities selling intrastate within 275 miles, which would include small farmers markets and roadside stands.

“AFIA believes everyone should be included as the law intended,” Wilkinson stated. She predicted that the human food preventative rule will be released first, followed by the foreign supplier certification rule, then the animal feed rule. The problem with this scenario is the feed industry cannot comment on the foreign supplier certification rule without knowing what the animal feed rule contains.

When the rules are finally published, there will likely be a 90 to 120 day comment period, with the Food and Drug Administration (FDA) then holding three public meetings, followed by an implementation period of 12 to 18 months. Wilkinson said it will be a “huge” job for FDA to hire and train inspectors, and encouraged renderers to use industry knowledge to start putting programs in place now.

Wilkinson next focused on state regulations, beginning with a new feed law update in Idaho that removes tonnage reporting and fees but proposes product registration fees. This changes the burden from one industry (livestock) to the feed ingredient industry. AFIA did not support the bill, which was pushed for by the dairy industry because of costs, but will approach the Idaho legislature in January to fight the new proposed fees.

Other states looking at possibly updating feed laws in 2013 include North Dakota, which hasn’t made changes since 1968, and New Mexico, no changes since 1978.

Randy Blach, Cattle-Fax, turned the focus to the livestock industry, reporting that Brazil and Australia are seeing growth in beef cows and global slaughter bottomed out in 2010, with projected growth of just over two percent in 2013. Closer to home, one of the worst droughts in US history has caused slaughter numbers to drop anywhere from three to 12 percent this year over 2011, and that trend is predicted to continue through 2014. To supplement the decline in cow numbers, Blach estimates the United States will import 1.8 million cattle from Mexico.

However, with cattle weights higher, up about 17 pounds just this year, “four steers produce as much beef today as five did 25 years ago,” he declared. Higher weights have offset about 75 percent of the impact of a declining cow herd over the last 20 years and helped to average US beef production at about 26 billion pounds per year over the past 15 years. The United States is the largest beef producer in the world, followed by Brazil, the 27 countries of the European Union (EU), and China, with all four combined producing around 60 percent of global demand.

As for pork production, Blach reported there has been a huge increase in swine slaughter over the past few months due to high-priced corn causing pork producers to lose $40 to $50 per head. Globally, pork production is seeing a 3.6 billion pound per year growth, with China being the number one producer at just over 50 billion pounds per year followed by the EU at 23 billion pounds annually. However, on January 1, 2013, a sow crate ban will take effect in China that could create a five to 10 percent drop in production. Blach predicts the United States will pick-up that decline. Currently, the country exports 24 percent of pork production, with estimates that number climbing to 30 percent in the next three to four years.

On the poultry side, the average young broiler live weight is nearing six pounds, up from five pounds in 2000. Globally, poultry production is seeing an average growth rate of 5.1 billion pounds per year, with the United States, China, Brazil, and EU being the top four producers with 64 percent of the global production.

Blach announced that tight corn stocks will keep prices high into next year. The United States has already met its renewable fuel standard requirements for corn ethanol and with 25 plants idle or operating below capacity due to high corn prices, ethanol imports are strong. Meat and bone meal prices and corn prices correlate about 83 percent.

World soybean production is projected to be 9.4 billion bushels for 2012/2013, with the long-term trend reaching 12.9 billion bushels by 2020. The United States produces 31 percent of the world’s soybeans, but only consumes 17 percent of its production so the rest is exported. Soybean prices are expected to trade from a low of around $13.50 per bushel to highs of $16.50 per bushel during the next eight months.

Blach commented that tallow prices are down slightly from 2011 and correlate about 85 percent with crude oil, which is expected to be priced in the $90 to $115 per barrel range for most of next year.

Over the long-term, Blach pointed out that to meet the needs of a growing population, global food production will have to increase 40 percent by 2030 and 70 percent by 2050, with beef and dairy production needing to double by that time. However, farming in 2050 will occupy only 13 percent more land than was used in 2008, yet he believes agriculture will be able to respond with the increase in plant production technology. In closing, Blach commended renderers for the service they provide the livestock industry, and declared the industry “the picture of sustainability.”

Committees ConvergeNRA committees hashed out various issues, beginning with the Animal Protein Producers Industry (APPI) Committee where Dr. David Meeker, senior vice president, NRA Scientific Services, announced that of the 203 plants that participate in APPI’s Salmonella testing program, 116 have been certified under the North American Rendering Industry Code of Practice.

“Good job, everyone,” he commended.

Jessica Meisinger, director, NRA Education and Com-munications, shared that FDA wants to put together a video to help train existing and new inspectors on rendering plant inspections. An FDA film crew and Meisinger will be the only personnel touring rendering plants and renderers have a say as to what can and can’t be filmed. Those areas of a plant that are not filmed will be diagramed to include in the final video. NRA will receive a copy of the final video for industry use and training under the Code of Practice. It was suggested to renderers that they should have a dry run with plant personnel of what is to be filmed before a film crew arrives.

The NRA Communications Committee is in need of a new approach to gather industry statistics since the US government is no longer collecting the data. The committee decided a survey would be composed for rendering companies to directly report the needed data to perhaps a third-party accountant so the information is kept confidential. NRA will then compile the statistics so they can continue to be reported in each April issue of Render and also be used for government international support programs and by industry supporters and financial institutions.

Meisinger noted that NRA now has a Twitter account (@renderers) as a way for “quick information dissemination.” The account currently has 55 followers including AFIA, National Chicken Council, the Food and Agriculture Organization Media Center, and noted agriculture bloggers.

Environmental Committee Chairman Robert Vogler, Valley Proteins, Inc. reviewed the Environmental Protection Agency’s (EPA’s) greenhouse gas regulations, which required renderers to report emissions from anaerobic waste digesters by September 30, 2012. He explained that under EPA’s boiler maximum achievable control technology, or MACT, rule adopted last year, which applies to all but the largest sources, there are specific requirements for new and existing boilers of all sizes that burn fuels other than gas at industrial, commercial, and institutional facilities. These requirements include certain notifications, performance testing, tune-ups, and energy audits. Vogler noted that some aspects of this rule, as well as regulations for major sources, are under reconsideration by EPA.

Another EPA activity on NRA’s radar screen is draft guidance on the agency’s Environmental Justice initiative that will require greater public participation, community outreach, and participation in the permitting process for facilities near minority and low income areas. Tighter restrictions on emissions, operating hours, and traffic, as well as other changes, are likely to be imposed as part of a settlement of contested permitting cases and enforcement activities.

Greg Sindt, Bolton and Menk, Inc. discussed activities relating to imposing total maximum daily loads in Iowa and elsewhere in the Mississippi River watershed. He raised concerns about the imposition of numeric limits for nitrogen and phosphorous and discussed alternative strategies. Sindt encouraged renderers to get involved in pending lawsuits and state regulatory activity on this issue.

Biofuels was on the agenda next as Committee Chairman Chuck Neece, Farmers Union Industries, LLC warned that 2012 biodiesel production will be flat compared to last year, but he expects an uptick come next February or March. Kopperud chimed in that 2013 will be a battleground for alternative energy legislation as the biodiesel industry continues to work feverishly to reinstate alternative fuel tax credits that expired at the end of 2011.

There was some discussion on the position of the Green Restaurant Association (GRA) that requires restaurants seeking certification by the group to recycle their used cooking oil through a biofuels producer. Committee members decided to have NRA staff contact GRA and encourage them to reconsider other sustainable uses for the disposal of used cooking oil. It was then announced that the National Restaurant Association is nearing completion of its own sustainability program that will be neutral on how restaurants recycle their used grease, and is welcoming NRA and renderers to be part of its sustainability program and a partner in the fight against grease theft.

In the Legislative Committee meeting, Carlos Gonzalez, Novus International, Inc. presented a plan of action to submit a food additive petition to FDA to expand the use of ethoxyquin in the United States. This is in response to FDA issuing an industry reminder to the feed industry of the improper use or improper labeling of ethoxyquin, an antioxidant used most often in rendered fats and proteins. According to Gonzalez, FDA said the product should not be used in animal protein meals.

Novus is asking for NRA’s and the industry’s support to show FDA the product is needed by renderers and the feed industry rather than just one company trying to make its product available for sale. In a letter explaining the petition process, Novus said if the petition is unsuccessful or cancelled, “renderers will no longer be able to use ethoxyquin in their product unless they can justify its use for stabilization of carotene, xanthophylls, and vitamins A and E. Regardless, product will need to be labeled and, until a second petition to increase application beyond 150 ppm [parts per million] is approved, they will need to maintain application levels at or below 150 ppm.”

The committee then shifted their attention to grease theft with a proposal presented by J.J. Smith, Valley Proteins, Inc.to hire an attorney who would gather pertinent information on thefts from across the country, prepare an investigative plan with the assistance of a former or retired Federal Bureau of Investigations (FBI) agent, then meet with the current FBI director and his criminal division staff to brief them on the magnitude of the problem and the benefits of an interstate investigation. Similar meetings would take place with the US Attorney General’s office. The proposal does not target any one area of theft, but puts the issue on the radar screen of the FBI and US Attorney General’s office.

John Mahoney, Mahoney Environmental, commented that any company who has an investigator on staff is “taking an incredible step toward this theft issue.” He emphasized the quality of the arrest is also key, which includes seizure of assets such as trucks, computers, and bank accounts. Mahoney remarked that his company has aided in 40 arrests and one conviction since last December.

During the NRA Board of Directors meeting, it was announced that the association welcomed three new renderer members this year – Smithfield Foods, Encore Oils, and Wardlaw’s Poultry – and a host of supplier members. The board then accepted proposed amendments to the NRA by-laws that will allow the board of directors to determine member dues on an annual fiscal basis. The by-laws now contain a set dues amount and the board must add monetary assessments each year to keep up with the rise in expenses. NRA members will be notified of the proposed dues changes and a vote to accept or reject those amendments will be done at a later time.

Globetrotting
The NRA convention features a focus on global matters with reports from the association’s regional directors and invited speakers from around the world. First up was Niels Nielsen, president, European Fat Processors and Renderers Association, who announced that beginning July 1, 2013, porcine and avian processed animal proteins will be allowed in European Union (EU) aquaculture feed. However, before those proteins can be expanded into other animal feeds, proper tests must be put in place to ensure no banned ruminant proteins are being used. Currently, the official tests allowed in the EU are the polymerase chain reaction, or PCR, and microscopy. The European Food Safety Authority has determined the critical limits to be two percent ruminant protein in non-ruminant proteins, and 0.1 percent ruminant protein in feed.

Nielsen explained the EU Renewal Energy Directive’s goal of 20-20-20 by 2020 as a 20 percent greenhouse gas emissions reduction compared to 1990, a 20 percent cut in energy consumption through energy efficiency, and a 20 percent share of renewable energy in the total energy mix, which includes a sub-target of 10 percent renewable energy in the transportation sector as biofuel. Under a proposed revision to the directive, five percent of that 10 percent biofuel target would come from first-generation biofuels (i.e., soybean, rapeseed, and palm oils, and wheat ethanol) with the other five percent derived from second-generation biofuels from animal fat and used cooking oil. Second-generation biofuels also count twice toward the target.

Julius Rath, Australian Renderers Association, provided an update from his country where the biggest concern is a carbon tax introduced in July 2012 that has increased energy costs for all industries and will likely raise $136 billion in tax revenue.

“This is the single biggest political issue in the country that will likely lead to a change in government,” Rath declared. As for market access, Australian meat and bone meal exports to China have been interrupted due to licensing regulations, but all plants have now been inspected and approved and are awaiting final health certifications. Indonesia became the top market for Australian proteins in 2011 over China and will most likely continue that trend for 2012 due to Indonesia’s ban on US meat and bone meal. Australian renderers produced 638,000 metric tons of animal proteins in 2011, of which 253,100 metric tons was exported and 207,000 metric tons was used in poultry feed.

Tallow exports to China, Australia’s largest market, have also been disrupted due to product substitution; users have found industrial tallow from Chinese food factories. Australia was seeking to export tallow to the EU for biodiesel use, but EU authorities voiced concerns over Australian cattle being treated with growth hormones. However, renderers are working with the EU government and are waiting for the market to open. Total tallow production in Australia in 2011 was 546,700 metric tons, of which 362,200 metric tons was exported.

Rath mentioned that due to ongoing consolidation, JBS and Cargill have now become the largest meat and rendering operations in Australia, then invited all to attend the Australian Renderers Association Congress July 23-26, 2013, in Melbourne, Australia.

Alexandre Ferreira, SINCOBESP (Brazil’s rendering association), predicted Brazil’s meat industry will grow about 20 percent between now and 2020. Prices for animal proteins in the country have risen seven percent from 2010 to 2011, with animal fat prices rising 27 percent. About 3.3 million metric tons of animal protein meals and 1.9 million metric tons of animal fats were produced in 2011 and are primarily used domestically. Eighty-three percent of animal meals produced are used for animal feed, 14.7 percent goes into pet food, and 2.3 percent is exported. As for all animal fats, 42 percent is used for cleaning products/soap, 32 percent into animal feed, and 19.7 percent for biodiesel. Tallow consumption in Brazil is mostly used for soaps (56 percent), biodiesel (25.6 percent), and animal feed (12.5 percent). Ferreira also extended an invitation to Brazil’s rendering industry meeting in Sao Paola, April 24-25, 2013.

Covering other global issues were NRA regional directors, beginning with German Davalos, who announced that Chile has become a very interesting market in the past 18 months, becoming the second largest salmon producer in the world after Norway. The country has increased its use of animal proteins in fish feed from one percent in 2000 to 20 percent today, mostly poultry by-product meal and feather meal. Of the 105,000 metric tons imported the first eight months of this year, 49,266 metric tons was from the United States and is anticipated to reach 70,000 metric tons by year’s end (other imports are from the EU, Brazil, and Argentina). Davalos added that if the trend of US protein exports to Mexico (65 percent poultry meal, the rest porcine meal) continues, imports could reach 100,000 metric tons by the end of 2012.

NRA regional director for Asia Peng Li informed the crowd that the association hosted a Chinese customer delegation to the United States in late August to examine rendering operations with the hope of opening the market for ruminant meat and bone meal. In Thailand, there is strong competition from the EU and market access issues for US meat and bone meal. Li did have encouraging news about some opportunities in Cambodia and Burma.

Kent Swisher, vice president, NRA International Programs, wrapped up the world tour with a look at US statistics, where 39 percent of protein meal consumption goes to poultry feed, 31 percent to pet food, and 20 percent is exported. Of rendered fat production, 35 percent is used in livestock feed, 29 percent is exported, 18 percent goes to biodiesel, and nine percent is taken by the oleochemical industry. Swisher showed how fat prices have “really” increased over time, and despite a stable demand for meals, prices have been dramatically rising as well, with Asian countries notably increasing their imports of animal proteins.